Canada is legalizing marijuana, and IBM wants to help.

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Canada is legalizing marijuana and leaving it up to provincial governments to regulate its sale and distribution. The government of British Columbia asked for comments on the best way to manage the province's marijuana market. In a regulatory filing, IBM argued that the province should use a blockchain to manage its legal marijuana market.

That is probably not a sentence that you ever expected to read. But it's not as crazy as it sounds.

IBM helped build a different kind of blockchain

The idea of a blockchain originated with Bitcoin. The Bitcoin blockchain is the public, shared ledger that keeps track of payments in the Bitcoin network. The volatility of Bitcoin's virtual currency has hampered its mainstream adoption as a payment network. But companies quickly realized that the core concept of the blockchain could be repurposed for other applications.

IBM was one of the leaders in the creation of Hyperledger, an open source blockchain project designed for use by enterprise customers. The Bitcoin network is designed to be fully public and decentralized, so it uses an elaborate (and energy-inefficient) consensus mechanism to ensure malicious network members can't tamper with the ledger or sabotage the network.

By contrast, IBM is interested in building private blockchains where network participants—like banks or supply chain partners—are known to one another and unlikely to launch outright attacks. So Hyperledger uses more lightweight mechanisms, like lotteries or majority voting, to achieve consensus on the network. These mechanisms consume fewer resources and allow faster and more predictable clearing of transactions.

The goal here is to build a distributed database that's maintained by a peer-to-peer network of companies involved in some kind of shared marketplace. Every company manages and maintains its own copy of the shared ledger, so there are no worries about the database becoming a single point of failure—or about after-the-fact tampering.

IBM argues that this kind of architecture leads to more open and transparent markets and supply chains. If everyone is using the same blockchain-based database to track their transactions, then more data is available more quickly to more market participants. In theory, that can eliminate inefficiencies that occur because different companies have incompatible databases and can't easily share information.

For example, Walmart is running a pilot program that would use an IBM-designed blockchain to manage its grocery supply chain. The idea is that everyone involved in supplying groceries to Walmart—overseas farmers, international shipping companies, American wholesalers, and so forth—will use the same blockchain-based system to record the sale of goods that are destined for Walmart's stores. They'll store metadata about things like safety inspections and expiration dates in the blockchain as well.

Then if Walmart has to investigate a potential safety problem, it can go to the blockchain and see the complete transaction history that brought a particular head of lettuce or package of sausages into a Walmart store. In theory, that will allow improved quality control and faster identification and removal of tainted groceries.

Of course, it's not obvious how much work the blockchain part of the system is doing here. Another option would be for Walmart to build a conventional database, expose APIs for suppliers to submit transaction information, and then grant suppliers access to relevant portions of the database. The hardest part seems to be getting thousands of upstream suppliers to adopt a standardized way of recording the information.

But a blockchain approach does have some important advantages. Blockchain transactions can be asynchronous—individual buyers and sellers can make transactions directly with each other without having to phone home to a centralized database. The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Beyond those technical advantages, the buzzy word "blockchain" could prove to have talismanic power. Building a conventional database to track items in your supply chain might not be sexy enough to make it to the top of a company's IT priority list. Building a blockchain to track items in your supply chain might have more juice. At least, that seems to be what IBM is betting on.

How a blockchain could help manage a marijuana supply chain

In a sense, Canadian provinces are facing the same kind of supply chain problem that Walmart is. Canada is legalizing marijuana, but provinces still want to keep a tight rein over where, when, and how marijuana is distributed. And IBM wants to help British Columbia do for pot what Walmart is trying to do for groceries.

"Blockchain is an ideal mechanism in which BC can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control," IBM writes.

In IBM's vision, "each party in the business network"—presumably meaning pot growers, processors, distributors, and retail locations—"is provided its own ledger copy showing all transactions." The shared ledger of marijuana transactions would be available for anyone with the right credentials to see, allowing regulators to conduct spot audits of every marijuana transaction in the province. Marijuana retailers would be able to identify which farm a particular batch of marijuana came from and what safety inspections were conducted along the way.

One obvious question here is whether it makes sense for hundreds of marijuana businesses in BC to be running blockchain software. Presumably, this is where IBM would come in, either helping marijuana businesses to set up their own blockchain nodes or giving them access to blockchain software based in IBM's cloud.

Promoted Comments

The advantage here seems to be that it cannot be tampered with, whereas a traditional database could be tampered with by the database owner.

But that problem could be solved even more easily by letting the database be controlled by someone with no interest in tampering with it. E.g. in this case, that would be the regulator and not the producers.

Because regulators are never known to take bribes?

The same could happen with any database, so you need to same safeguards you typically would use to restrict what data what individual can access, log what data they do access, log changes that are made, and audit those logs. You could then bribe the people who maintain the database and also the people who do the auditing, but at some point you have involved so many people that the risk and expense of bribery just doesn't pay off.

Suggestions that "blockchain is a solution in search of a problem", and that "it's just like a traditional database" seem, to my eyes, myopic. Imagine, if you will:

* "Git is just like CVS, only more complicated"* "Cell phones are just like land lines, only more expensive"* "Cars are just like horses, only more expensive to fix"* "Machine guns are just like rifles, only faster"

The long-term consequences of each of these technological developments was poorly understood at first. Each of these techs also changed the course of history, in ways small or large.

I bring up git because it illustrates how disruptive and just plain **different** a distributed, asynchronous architecture is from its centralized brethren.

The only reason blockchain is being considered is because the world banks prefer to finance the opioid military industrial complex instead.

Quote:

Of course, it's not obvious how much work the blockchain part of the system is doing here.

It's not about the supply chain no matter how much IBM wants you to believe it. Blockchain has always been about financial decentralization, which, as the term implies, very much hurts the central banks.

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

Just a guess here, but they would be able to see the transaction, but some of the details or metadata of the transaction would be obfuscated.

For example, one Vendor C might see that 2 pounds of Kush went from one vendor (Vendor A) to another vendor (Vendor B). However, Vendor C does not know the identities of Vendors A and B.

The advantage here seems to be that it cannot be tampered with, whereas a traditional database could be tampered with by the database owner.

But that problem could be solved even more easily by letting the database be controlled by someone with no interest in tampering with it. E.g. in this case, that would be the regulator and not the producers.

"Blockchain is an ideal mechanism in which BC can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control," IBM writes.

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

Just a guess here, but they would be able to see the transaction, but some of the details or metadata of the transaction would be obfuscated.

For example, one Vendor C might see that 2 pounds of Kush went from one vendor (Vendor A) to another vendor (Vendor B). However, Vendor C does not know the identities of Vendors A and B.

While that might be the idea, it is a really poor design.As soon as anyone can correlate Vendor A with an entry on a blockchain, they can see all the transactions etc, what benefit does blockchain even give here?

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

The word that springs to mind here is "Monopsony". That's a market in which there is only one buyer (monopoly being only one seller). Walmart, Amazon and similar outfits control market access if they're the sole places individual customers can go to for goods. This allows them to dictate pricing to their various suppliers. Using blockchain to manage such a monopsony, well, sure it could work.

But in cannabis production, as in wine production, or coffee production, the source matters. People will be far more interesting in purchasing cannabis that can be traced back to a specific grower; blockchain seems more about hiding this information.

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

Just a guess here, but they would be able to see the transaction, but some of the details or metadata of the transaction would be obfuscated.

For example, one Vendor C might see that 2 pounds of Kush went from one vendor (Vendor A) to another vendor (Vendor B). However, Vendor C does not know the identities of Vendors A and B.

While that might be the idea, it is a really poor design.As soon as anyone can correlate Vendor A with an entry on a blockchain, they can see all the transactions etc, what benefit does blockchain even give here?

Offhand, pricing comes to mind. C can see that A sold some amount to B, but not how much was sold or how much B paid.

Or the system might track track how much a dispensary has sold and in how many transactions, but would need "higher-level" access to see which consumers those transactions "belong to".

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

Currently only smokables will be sold. Edibles, oils, etc will not be allowed to be sold at the beginning. The Canadian governmetn and Health Canada are dragging their feet on really the largest market for marijuana.

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

Basically, this is ripping off the customer. A large proportion of the active ingredient (THC/CBD glands) on the surface of the flower is thus removed from the final product (buds) and sold separately (as keef, hash, extract, etc.). This results in greater profits for the supplier.

Let alone the commercial growers often use pesticides and fungicides because they're too lazy to keep their growing operations clean and spotless, which requires extra hours of labor each day, and their claims about CBD vs THC content are often bogus, as they don't really know what they're growing.

The only real solution is tighter regulations; but only allowing the sale of whole buds could curb these rip-off practices.

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

Basically, this is ripping off the customer. A large proportion of the active ingredient (THC/CBD glands) on the surface of the flower is thus removed from the final product (buds) and sold separately (as keef, hash, extract, etc.). This results in greater profits for the supplier.

Let alone the commercial growers often use pesticides and fungicides because they're too lazy to keep their growing operations clean and spotless, which requires extra hours of labor each day, and their claims about CBD vs THC content are often bogus, as they don't really know what they're growing.

The only real solution is tighter regulations; but only allowing the sale of whole buds could curb these rip-off practices.

That puts a song in my heart...

Homegrown's all right with me.Homegrown is the way it should be.Homegrown is a good thing.Plant that bell and let it ring.

Came here to say this. I don't see why we should be funneling even more money into IBM. At this point a single person with a spreadsheet signing checks by hand would be more effective than this supposed pay system.

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

Basically, this is ripping off the customer. A large proportion of the active ingredient (THC/CBD glands) on the surface of the flower is thus removed from the final product (buds) and sold separately (as keef, hash, extract, etc.). This results in greater profits for the supplier.

Let alone the commercial growers often use pesticides and fungicides because they're too lazy to keep their growing operations clean and spotless, which requires extra hours of labor each day, and their claims about CBD vs THC content are often bogus, as they don't really know what they're growing.

The only real solution is tighter regulations; but only allowing the sale of whole buds could curb these rip-off practices.

I didn't say I agree with commercial pruning practices, that's for sure. I grow my own and even in my mediocre care the flower I get looks prettier and is waaaay better. I could go buy a dispensary's best strain and it wouldn't hold a candle to what I grow. Not because it's genetics are better or anything, it just looks manufactured because they've taken something completely natural and have used mechanical finishing processes.

That aside, this was going on before there was a legal industry, and you're still getting X weight for Y dollars, I don't think it's a "Scam" exactly.

The advantage here seems to be that it cannot be tampered with, whereas a traditional database could be tampered with by the database owner.

But that problem could be solved even more easily by letting the database be controlled by someone with no interest in tampering with it. E.g. in this case, that would be the regulator and not the producers.

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

It says it right up there in the article: with blockchain!

I've heard if you seed The Cloud with blockchain you can make it rain buzzwords. Or, presumably, cash via open-ended government contacts.

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

To oversimplify it, it would be similar to pgp encrypted email. Only the user whom entered it could determine what it meant.

This is my question too. Commercial marijuana growers use pruning baskets for their flower, it's basically a wire rock tumbler that shears off the outer layer of sugar leaves, the crystals and a bit of shake. It makes the buds nice and round and appealing looking. What's trimmed off generally is sifted and then used for concentrates and edibles, and the leftover is sold in the shake jar. So a percentage of the plant is sold as flower, and another percentage goes into other products. How do they actually track and quantify this?

Basically, this is ripping off the customer. A large proportion of the active ingredient (THC/CBD glands) on the surface of the flower is thus removed from the final product (buds) and sold separately (as keef, hash, extract, etc.). This results in greater profits for the supplier.

Let alone the commercial growers often use pesticides and fungicides because they're too lazy to keep their growing operations clean and spotless, which requires extra hours of labor each day, and their claims about CBD vs THC content are often bogus, as they don't really know what they're growing.

The only real solution is tighter regulations; but only allowing the sale of whole buds could curb these rip-off practices.

I didn't say I agree with commercial pruning practices, that's for sure. I grow my own and even in my mediocre care the flower I get looks prettier and is waaaay better. I could go buy a dispensary's best strain and it wouldn't hold a candle to what I grow. Not because it's genetics are better or anything, it just looks manufactured because they've taken something completely natural and have used mechanical finishing processes.

That aside, this was going on before there was a legal industry, and you're still getting X weight for Y dollars, I don't think it's a "Scam" exactly.

Actually its X weight with Y potency (CBD/THC) for Z dollars... so its far from a scam.

I'm interested to see how local governments can leverage the blockchain concept to facilitate trade in other markets where reliance on other currencies has been a limiting factor. This might not sound that relevant to developed nations, but a lot of third world countries tie international trade to currencies like the dollar, and with limited buying power, this limits their ability to trade. This is a problem that I think blockchain can help to solve.

The advantage here seems to be that it cannot be tampered with, whereas a traditional database could be tampered with by the database owner.

But that problem could be solved even more easily by letting the database be controlled by someone with no interest in tampering with it. E.g. in this case, that would be the regulator and not the producers.

Because regulators are never known to take bribes?

The same could happen with any database, so you need to same safeguards you typically would use to restrict what data what individual can access, log what data they do access, log changes that are made, and audit those logs. You could then bribe the people who maintain the database and also the people who do the auditing, but at some point you have involved so many people that the risk and expense of bribery just doesn't pay off.

Cannot be tampered with? Didn't this previous Ars article lay waste to that idea? I think I read today that the 280 million in ethereum is totally lost unless they do a hard fork.

State laws cannot override a federal law. IBM, in theory could have assets seized by the IRS, be charged with trafficking by the DEA, racketeering or conspiracy by the FBI, and have their access to banking cut off by the Treasury if the feds decide they are participating in the "drug trade". That is a LOT of potential liability minus a federal legalization of pot.

Cannot be tampered with? Didn't this previous Ars article lay waste to that idea? I think I read today that the 280 million in ethereum is totally lost unless they do a hard fork.

State laws cannot override a federal law. IBM, in theory could have assets seized by the IRS, be charged with trafficking by the DEA, racketeering or conspiracy by the FBI, and have their access to banking cut off by the Treasury if the feds decide they are participating in the "drug trade". That is a LOT of potential liability minus a federal legalization of pot.

The blockchain implementation they're speaking of here is HyperLedger Fabric which has the concept of channels which are themselves blockchains. Channel reading/writing are restricted to certain members of the network.

The Hyperledger stack also offers cryptographic features that can limit one vendor from snooping on another vendor's transactions—something that might be more difficult to get right with a centralized database.

Blockchain noob here, but how does that work if it's a shared ledger covering all transactions?

It is an interesting proposal. On the other hand, I guess maybe I am being supremely ignorant of the logistics involved, but it seems like a centralized database that the regulator houses should be more than sufficient to track this.

I saw a similar argument made the other day that firearm transactions/serials need to be done through blockchain accounting. As I pointed out the issue with that, beyond any constitutional issues and compliance issues, is how to actually get everything with a blockchain unique ID tied to the serial number. The WIDE variety in the format of serial numbers. The fact that most non-military firearms pre-GCA do not have serial numbers. The fact that home made firearms are perfectly legal, so how do you add those to the blockchain (and be really uniquely identified. I know ATF requirements on serializing a home made firearm prior to sale, but their requirements don't necessarily mean something will really be unique from an end user perspective).

It was an interesting thought experiment though. But I don't know that tracking transactions really helps solve anything (on a firearm front, I guess it does on a MJ front for taxation purposes).